The Federal Deposit Insurance Corp. Thursday sued 17 former executives and directors of Silicon Valley Bank, accusing them of gross negligence and breaching fiduciary duties the agency says contributed to the Northern California bank's historic demise.
The FDIC pointed to the bank's reliance on unhedged, interest rate-sensitive assets, such as long-term U.S. Treasuries and mortgage-backed securities, despite rising interest rates. It also flagged a $294 million dividend paid to the bank's parent company in December 2022, calling it "grossly imprudent" during a period of financial distress.
Defendants include SVB's former CEO Gregory Becker, CFO Daniel Beck and four other executives, alongside 11 former directors.
Following the failure — which triggered a regional
The FDIC's investigation into the collapse — culminating in the decision to consider legal action — revealed significant failings in SVB's risk management practices, the agency said. According to the agency, the bank's former leadership allowed excessive exposure to long-term securities in a rising interest-rate environment, removed crucial safeguards against interest-rate fluctuations and authorized what the FDIC says were imprudent dividend payments to the parent company during financial distress. These decisions compounded SVB's losses, and the lawsuit being considered by the FDIC would aim to recover these damages.
It's not uncommon for regulators to sue former bank executives to recoup losses in situations where a bank's failure is costly to resolve. Legal action involving Biden-appointed bank regulators' has made news more than once in the last days of the administration. The Office of the Comptroller of the Currency recently
Thursday's suit stems from an effort — contemplated by the agency in recent months — to hold SVB's leaders accountable for mismanagement leading to the bank's failure. In December 2024, the FDIC board
During the board meeting, outgoing FDIC Chair Martin Gruenberg — who has only days left at the agency — highlighted the need for accountability. Consumer groups have praised the agency for taking up legal action as a way to deter future misconduct.
"As a result of the mismanagement of the held-to-maturity securities portfolio, the termination of interest-rate hedges on the available for sale securities portfolio, and the issuance of the bank-to-parent dividend," Gruenberg said, "SVB suffered billions of dollars in losses for which the FDIC as Receiver has both the authority and the responsibility to recover."
